In a sweeping overhaul of its digital asset governance, the United Arab Emirates has introduced Federal Decree Law No. 6, a new financial regulation that officially brings DeFi (decentralized finance) and Web3 platforms under the authority of the UAE Central Bank. The landmark law expands the country’s oversight of digital financial activities, effectively ending the long-standing “just code” defense used by decentralized protocols to avoid regulatory accountability.
Under the new framework, the UAE Central Bank now has broad powers to investigate, monitor, and enforce compliance across decentralized platforms operating within its jurisdiction or serving UAE users. In addition, the law introduces penalties reaching up to $272 million, targeting unlicensed operations, fraudulent activities, and severe breaches of financial rules.
The announcement marks one of the strongest regulatory actions globally, signaling that DeFi platforms will now be treated on par with traditional financial institutions in terms of compliance standards and user protection obligations.
A Turning Point for DeFi Oversight in the Middle East
The UAE has emerged as one of the most influential global hubs for digital assets, hosting major exchanges, blockchain companies, and Web3 innovators. However, the expansion of its regulatory framework reflects increasing concerns around security, consumer protection, and systemic risks associated with decentralized platforms.
With the new decree, DeFi projects can no longer claim immunity by arguing that smart contracts operate autonomously without a controlling entity. The UAE has clearly stated that any platform centralized or decentralized offering financial services to UAE users must comply with licensing, anti-money-laundering, and operational transparency obligations.
This move aligns the country with global regulatory efforts aimed at bringing DeFi into formal financial jurisdictions, similar to recent guidance from the European Union and international financial watchdogs.
Ending the “Just Code” Defense
Under previous norms, many decentralized platforms defended their operations by claiming they merely published open-source code. The new UAE law eliminates that argument entirely. If a platform enables lending, borrowing, payments, digital asset trading, or yield-generating activity, it is considered a financial service regardless of whether it operates without a central operator.
By rejecting the “just code” defense, the UAE aims to:
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Prevent illicit financial activity through anonymous protocols
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Ensure user accountability and fund safety
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Establish legal liability for developers and operators
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Encourage responsible DeFi innovation under regulatory supervision
Penalties Up to $272 Million
One of the most notable aspects of Federal Decree Law No. 6 is the introduction of severe penalties. Violations can result in fines reaching $272 million, depending on the severity and scale of misconduct.
These penalties apply to:
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Operating unlicensed digital financial services
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Fraudulent or deceptive activity
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AML/KYC violations
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Running non-compliant DeFi or Web3 platforms
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Providing financial services without proper governance
The law sends a clear message: digital financial innovation is welcome, but not at the expense of consumer safety or financial stability.
Impact on Web3 and Crypto Companies
The decree affects a broad spectrum of digital businesses, including DeFi protocols, Web3 payment apps, NFT marketplaces with financial functionality, wallets offering yield, and decentralized lending services.
Companies must now:
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Obtain appropriate licenses
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Implement KYC/AML systems
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Provide transparency on operations
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Maintain auditable financial records
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Comply with Central Bank oversight
Experts say the law will likely push more crypto companies to relocate to Dubai’s regulated zones or partner with licensed UAE financial institutions.
Strengthening Global Leadership in Digital Finance
While the regulations are strict, many analysts argue they will strengthen the UAE’s long-term position as a global digital asset hub. Clear rules attract institutions, improve investor confidence, and reduce regulatory uncertainty an essential factor for sustainable Web3 growth.
FAQs
1. What is Federal Decree Law No. 6 in the UAE?
It is a new financial regulation that brings DeFi, Web3, and digital financial services under the UAE Central Bank’s supervision.
2. Does the law affect decentralized platforms?
Yes. DeFi platforms can no longer use the “just code” defense and must comply with licensing and AML rules.
3. What penalties can violators face?
Fines can reach up to $272 million for severe regulatory breaches.
4. Does this apply to foreign platforms serving UAE users?
Yes. Any DeFi or Web3 platform accessible to UAE residents falls under regulatory scope.
5. Is the UAE still supportive of crypto innovation?
Absolutely. The law aims to strengthen safety, not restrict innovation, and solidifies the UAE’s commitment to regulated digital finance.